"I think it is absolutely essential for all of us ...that in this battle, we need the Kashmiri people on our side. It's a battle for sovereignty, it's a battle against separatists and terrorists and the key is also held by the people," he said.
"And therefore our approach has to be guided by the fact that those people are on our side, and not with the separatists," he said while delivering the first Atal Bihari Vajpayee Memorial Lecture here.
He regretted that at a time when the country is dealing with troubles being fomented from across the border, some local groups have joined them and the worst sufferers are Kashmiri people themselves.
"How do we resolve the situation? Governments have said that we are ready for the most logical option. We are willing to talk to people, we are willing to even interact and involve regional mainstream parties into it," he said.
Jaitley also said that mainstream regional parties, which speak one language in Srinagar and another in Delhi, must have the courage to face the situation.
They need to create an alternative set of discourse in the Valley for separatists, he said adding "Unfortunately they duck that responsibility. And therefore this is a battle which India has to win and I have no doubt in mind, we will succeed in it at the end of the day because the politics of India has to send a clear message that separatism will never be accepted by India and its mainstream".
He said that every policy and position that the government takes have to be guided by one of the yardsticks that "the people of Kashmir have to be gradually brought on this side and that will be the real test of when we succeed".